--- title: "UK economy grows 0.1pc in August ahead of Healey Budget" publisher: "Stockmark.IT" author: "Stockmark.IT Website" published: "2026-10-16T07:34:28+00:00" modified: "2026-10-16T07:34:28+00:00" date: 2026-10-16 canonical: "https://stockmark.it/economy-slows-before-healeys-maiden-budget/" category: "UK Economy" categories: ["UK Economy", "UK Inflation"] image: "https://i0.wp.com/stockmark.it/wp-content/uploads/2026/10/uk-economy-grows-0-1pc-in-august-ahead-of-healey-budget.png?fit=1536%2C1024&quality=80&ssl=1" format: "news" language: "en-GB" --- # UK economy grows 0.1pc in August ahead of Healey Budget **Published:** October 16, 2026 **Author:** Stockmark.IT Website **Categories:** UK Economy, UK Inflation **Featured image:** ![UK economy grows 0.1pc in August ahead of Healey Budget](https://i0.wp.com/stockmark.it/wp-content/uploads/2026/10/uk-economy-grows-0-1pc-in-august-ahead-of-healey-budget.png?fit=1536%2C1024&quality=80&ssl=1) --- The United Kingdom’s economy recorded a modest expansion in August, a development that offers a measure of reassurance to Chancellor John Healey ahead of his maiden Budget. According to the Office for National Statistics, gross domestic product grew by 0.1 per cent during the month. This figure represents a sharp deceleration from the 0.4 per cent growth recorded in July, yet it exceeded the 0.1 per cent contraction that analysts had predicted. The data arrives less than two weeks before the Chancellor is scheduled to deliver his fiscal plans to Parliament on 28 October. The performance of the economy was underpinned by spending linked to the build-out of artificial intelligence infrastructure, which helped offset weakness in other sectors. The dominant services sector showed no growth in August, while the construction sector contracted by 0.2 per cent, marking its fourth consecutive monthly decline. Despite the slowdown, the Chancellor described the figures as welcome news, citing Britain’s resilience in the face of global shocks, including conflicts in the Middle East and Europe. He noted that the data reinforces the government’s commitment to managing public finances within existing budgets while providing households with some relief from cost-of-living pressures. Market reaction to the data was mixed but generally positive for sterling. The pound climbed 0.6 per cent against the US dollar to reach $1.326, supported by the better-than-expected growth figures and a broader flight to safety as investors moved away from riskier assets. This shift was driven partly by a sell-off in technology stocks, which has increased demand for government bonds and lowered borrowing costs. On the London Stock Exchange, the FTSE 100 index rose 0.5 per cent, with bank shares leading the gains. Lloyds Banking Group shares increased by 2.2 per cent and NatWest rose by 2.3 per cent, following the Chancellor’s suggestion that the sector may avoid windfall taxes in the upcoming Budget. Economists have offered varied interpretations of the data. Paul Dales of Capital Economics described the UK economy as remarkably robust, noting that while rising inflation is expected to dampen future growth, the current resilience exceeds previous expectations. Conversely, Simon French of Panmure Liberum highlighted that private sector GDP growth has risen by only 2 per cent over the last four years, compared to a 12 per cent increase in government activity. He suggested that real output for private sector businesses has been trading sideways, indicating that the recent growth is heavily reliant on public expenditure and specific pockets of strength in the AI sector. Morgan Stanley has raised its third-quarter growth forecast to 0.65 per cent following the data, but warned that a significant external inflationary shock from rising energy prices looms. The bank expects the Bank of England to raise interest rates twice, in November and February, to combat inflation that could reach 4 per cent by the first quarter of 2027. Sarah Breeden, a deputy governor of the Bank of England, expressed surprise at how well the economy has absorbed the energy price shock, noting that policymakers are closely monitoring the labour market to determine if this resilience will translate into higher inflation. She indicated that the focus remains on whether the current growth will lead to a tightening of the labour market, which would necessitate further monetary tightening. The International Monetary Fund recently reported that the UK is raising taxes at the fastest pace in the Western world, with the tax burden projected to reach a peacetime high of 41.9 per cent of GDP by the start of the next parliament. This context adds pressure on the Chancellor to balance fiscal consolidation with economic support. Healey has stated that he and Prime Minister Andy Burnham are aligned on the need to control spending and meet fiscal rules in full. He has refused to speculate on specific tax measures, such as capital gains tax, arguing that pre-Budget speculation is damaging to economic confidence. The Chancellor emphasised that the Budget will aim to provide breathing space for households and businesses while reinforcing the strength of the UK’s fiscal plans and economic resilience for the future. --- **Original URL:** https://stockmark.it/economy-slows-before-healeys-maiden-budget/ *Created by [WP Markdown Endpoint](https://wpmarkdownendpoint.com/)*